major macro economic indicators
|2016||2017||2018 (e)||2019 (f)|
|GDP growth (%)||1.8||1.7||1.3||1.2|
|Inflation (yearly average, %)||0.7||2.7||2.6||2.0|
|Budget balance (% GDP)||-2.9||-1.8||-1.3||-1.7|
|Current account balance (% GDP)||-5.2||-3.7||-3.3||-3.1|
|Public debt (% GDP)||87.9||87.4||86.0||85.3|
(e): Estimate. (f): Forecast.
- Hydrocarbon production covering three quarters of energy needs
- Cutting-edge sectors (aerospace, pharmaceuticals, automotive)
- Financial services
- Competitive and attractive tax regime
- Uncertainties about the future relationship with the EU
- High government and household debt (124% of disposable income)
- Low productivity and lack of training not conducive to innovation
- Regional disparities between London and the south-east, and the rest of the country, particularly in terms of transport and energy infrastructure
Slight slowdown subject to a Brexit deal
The magnitude of the slowdown in growth in 2019 will depend on the terms of Brexit. At the beginning of January 2019, these remained uncertain, with Parliament preparing to vote on the agreement presented by the government. If approved, the UK will leave the EU at the end of March 2019. If rejected, Prime Minister Theresa May could try to continue negotiations with the EU, resign, or face a vote of no confidence from the opposition (Labour). The latter two scenarios would lead to new elections. If necessary, the UK’s withdrawal from the EU could be delayed, in order to avoid a no-deal Brexit while elections with an uncertain outcome are being held. Labour, although torn between backing a second referendum or negotiating a permanent customs union with the EU, could then succeed. While a no-deal Brexit scenario in March 2019 – which would severely curtail activity – is unlikely, it cannot be entirely ruled out. Persistent uncertainty will be a key factor in the recovery of business investment, which was already affected in 2018. Investment in equipment and construction alike will remain sluggish due to higher credit costs, as the key interest rate is gradually increased (+0.25 point hike per year since 2017, with the same expected in 2019). In addition, even in the event of a Brexit agreement, uncertainties about the future trade relationship with the EU will further hinder the development of production capacity, including value chains. At the same time, household consumption is expected to slow slightly due to less dynamic job creation and low real wage growth, even though inflationary pressures are set to ease in line with the stabilisation of oil prices. Moreover, given their low level of confidence, households are likely to rebuild their savings after significantly reducing them in recent years (4.4% of disposable income in mid-2018 compared with 9.2% in 2015). However, subject to approval of the 2019 budget, household consumption will be supported from April onwards by the 4.9% increase in the minimum wage, which will affect almost 10% of employees, and by the 5.5% increase in the income tax exemption threshold (up to GBP 12,500 per year). Fiscal policy would be accommodative in 2019 (estimated growth effect of 0.3 percentage point of GDP) with a sharp increase in public spending, particularly in the National Health Service (NHS). Moreover, unless there is a no-deal Brexit, exports should remain resilient despite the slowdown of the main partners (eurozone, China, United States). Nevertheless, with imports set to rebound in 2019, the positive contribution of foreign trade to growth will decline. In the current setting of financial constraints and low household confidence, which is not conducive to major purchases, the automotive sector is expected to remain among the most affected, after recording a 7% drop in new vehicle registrations over the first ten months of 2018 and a 6% decline before that in 2017.
A 2019 draft budget to support growth
According to the draft budget to be voted on in the first quarter of 2019, the government will implement a less restrictive fiscal policy in 2019 to support activity. The new measures include notably a spending increase of GBP 10.9 billion (0.5% of GDP), two thirds of which will be allocated to the NHS, with the remainder going to education, social assistance and defence. On the revenue side, while the main measure concerns raising the thresholds for the first and last income tax brackets (estimated cost of GBP 2.8 billion, or 0.1% of GDP), taxes on fuel and alcoholic beverages will ultimately remain frozen (cost of GBP 1 billion). Consequently, the UK’s government deficit will rise again, but will remain well below 3%. The public debt will continue to decline.
While remaining largely in deficit, the current account balance is expected to continue to improve in 2019, despite the widening goods deficit. The latter is not offset by the balance of services, which shows a substantial surplus. As in 2018, the improvement in the current account balance will therefore be driven by the contraction in the income deficit, in connection with the increase in investment income abroad. Despite the uncertainty related to Brexit, the United Kingdom will continue to easily finance its large current account deficit through investment flows.
Complete uncertainty about the Brexit agreement
Since the June 2017 elections, Prime Minister Theresa May has depended on a fragile alliance between her Conservative Party and the Democratic Unionist Party (DUP), a Protestant conservative party from Northern Ireland. After many months of negotiations and dissension within her own government, Mrs May managed to reach an agreement with the EU on the terms of Brexit in November 2018, and finally delayed the Parliamentary vote until mid-January 2019, in anticipation of a likely rejection in December. After this delay, Mrs May faced a confidence vote in her own party leadership, which she won (by 200 to 117). While this incident exposed the Conservative Party's division over Brexit, the Labour party has also struggled to articulate a unified strategy behind its leader, Jeremy Corbyn. In early January 2019, ahead of the vote by Parliament, the outcome and duration of negotiations between the UK and the EU remained highly uncertain.
Last update : February 2019
Cheques are frequently used for domestic and international commercial payments, although bills of exchange and letters of credit are preferred for international transactions. Bank transfers – particularly SWIFT transfers − are also often used and are viewed as a fast and reliable method of payment. Direct Debits and Standing orders are also recognised as practical solutions for making regular or anticipated payments and are particularly widely used in domestic transactions. It is acceptable to issue invoices both before and after the supply of goods or services.
The debt collection process usually begins with the debtor being sent a demand for payment, followed by a series of further written correspondence, telephone calls and (if the value of the debt permits), personal visits and debtor meetings. The collection process has been designed as a progression of stages, beginning with an amicable (pre-legal) collection phase and escalating up to litigation, should the debtor fail to meet his obligations.
The County Court only has civil jurisdiction. Judges handle claims for debt collection, personal injury, breach of contract concerning goods or property, land recovery and family issues (such as divorce and adoption). Cases valued at less than GBP 25,000 (or under GBP 50,000 for personal injury cases) must have their first hearing in the county court.
The High Court is based in London, but also has provincial districts known as “District Registries” all over England and Wales. It has three divisions: the Queen’s Bench Division, the Chancery Division, and the Family Division.
The Court of Appeal has two divisions – the Civil Division and the Criminal Division.
The Supreme Court is composed of a president, a deputy president, and twelve professional justices.
Fast-track proceedings (Summary Judgments)
In order to apply for a summary judgment, the claimant must obtain an Application Notice Form from the court. This should be supported by a Statement in which the claimant sets out why he believes that summary judgment should be given − either because the defendant has no real prospect of successfully defending the claim, or because there is no reason why the case should be decided by a full trial.
A copy of this statement is served on the opponent seven days before the summary judgment hearing. The opponent also has the opportunity of presenting a statement, but this must be sent no later than three days before the hearing. The claimant cannot apply for summary judgment until the debtor has either returned an acknowledgment of service form, or has filed a defence. If the court agrees with the claimant, it will return a favourable judgment. The application will be dismissed if the court does not agree with theclaimant.
There are now identical procedures and jurisdictions for the County Court and the High Court. A number of litigation “tracks” have been created, each with their own procedural timetables. Claims are allocated to a track by a procedural judge, according to their monetary value. There are transaction processes that need to be followed before initiating a court action. These processes have been designed to encourage the parties concerned to settle disputes without the need for court proceedings, thus minimising costs and courttime.
Proceedings formally commence when the claimant (formerly “the plaintiff”) files a Claim Form with the County Court or the High Court. Full details of the complaint are set out in the Particulars of Claim, which is usually a separate document which supports the Claim Form. The Claim Form must be served on the defendant by the court, or by the claimant. The defendant can then respond to the claim form within 14 days of service. A time extension of 28 days is agreed for the debtor to file a defence and/or a counter-claim. Once these formal documents have been exchanged, the court orders both parties to complete an “Allocation Questionnaire”.
Freezing order (formerly Mareva Injunction)
A freezing order (or freezing injunction) is a special interim order which prevents the defendant from disposing of assets or removing them from the country. One of the conditions attached to the granting of such an order is often that the applicant will pay full costs to the person against whom it was made, if it turns out to be inappropriate. A typical commercial dispute can take 18-24 months to reach a judgment, starting from the time legal action is first initiated.
Enforcement of a Legal Decision
A number of enforcement mechanisms are available. These include the Warrant of Execution (which allows a County Court Bailiff to request payment from the debtor) and the Writ of Fieri Facias for debts exceeding GBP 600, under which a High Court Enforcement Officer can make a levy on goods to the equivalent value of the judgment debt (for subsequent sale at auction and offsetting against the amount due).
As a member of the European Union, the UK has adopted several enforcement mechanisms for decisions rendered in other EU countries. These include EU payment orders which are directly enforceable in domestic courts and the European Enforcement Order, for undisputed claims. Judgments issued in non-EU countries are recognised and enforced if the issuing country has an agreement with the UK. If no such agreement is in place, an exequatur procedure is provided by English Private International Law.
Administration is intended as a rescue mechanism which enables companies (wherever possible) to continue with their business operations. The procedure is initiated either by applying to the court for an administration order, or by filing papers with the court documenting the out-of-court appointment of an administrator.
Company Voluntary Arrangement (CVA)
The CVA is an informal but binding agreement, between a company and its unsecured creditors, in which the company’s debts are renegotiated. It can be used to avoid or support other insolvency procedures, such as administration or liquidation. It provides for a restructuring plan which imposes the support of dissenting creditors.
Creditor’s Scheme of Arrangement
The Creditor’s Scheme of Arrangement is a court-approved compromise or arrangement, between a corporate debtor and all classes of its creditors, for the reorganisation or rescheduling of its debts. It is not an insolvency procedure and does not include a moratorium on creditor action. It can, however, be implemented in conjunction with formal insolvency proceedings, (administration or liquidation). It can also be implemented on a standalone basis by the debtor company itself.
There are three types of receivers. The first of these is a receiver appointed with statutory powers. The second type of receiver is one who is appointed under the terms of a fixed charge or a security trust deed. The third category is an administrator (who is appointed under the terms of a floating charge over all, or a substantial share, of the debtor company’s property.
A company can enter voluntary or compulsory liquidation. Voluntary liquidations can be either a “members’ voluntary liquidation” or a “creditors’ voluntary liquidation”. Both of these proceedings are initiated by the company itself, by passing a resolution during a meeting of members. The company then ceases trading and a liquidator collects the company’s assets and distributes the benefits to the creditors so as to satisfy, as far as possible, the company’s liabilities.